SIMON LAMBERT: What should the Chancellor do on Budget day? Take an axe to these bad taxes

Budget axe: You wouldn't design a tax system like the one George Osborne commands, says Simon Lambert

What would you do if you stood in the Chancellor’s shoes on Budget day?

The realist’s answer to that is that George Osborne has very little room for manoeuvre, so probably not much different. But as it’s highly unlikely that you or I will be magically appearing with the Budget box, we can think more radically.

I’d take an axe to Britain’s bad taxes – and by accident or design we’ve ended up with a lot of those.

Stamp duty is unfair and inhibits movement. Its slab system that imposes the rate above thresholds on the entire property purchase price is so daft that no other tax is structured like this.

Move above the lowest 1 per cent and stamp duty starts to hammer people for huge sums simply for moving home. Buy a home costing more than £250,000 and you will pay 3 per cent – hitting you with a bill for at least £7,500.

Has house price inflation pushed the price tag on housing your family above £500,000? That will be £20,000 to the Government, please.

There are two long-standing reasons why our stamp duty system is unfair. Firstly, it is a tax paid by the buyer, which is ultimately set based on how much money the previous owner is making on it. (It’s also worth bearing in mind that for most people a sizeable chunk of it is a tax on their mortgage.)

Secondly, if that £250,000 threshold had risen in line with Halifax house price inflation since Gordon Brown introduced it in 1997, it would now stand at £705,000.

Stamp duty now ensnares ordinary families in something originally designed for the wealthiest. And this is where we meet its cousin inheritance tax.

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Inheritance tax became a money-spinner thanks again to house price inflation. The majority of people caught in the net of a 40 per cent tax on their estate above a certain level are put there by their home.

Soaring house prices in the last two decades have shoved millions of households into higher stamp duty and IHT brackets.

It was designed as a tax on the rich, now it is a tax on the middle-class in swathes of southern England. It is, unsurprisingly, highly unpopular and takes money off people who would quite likely spend a fair bit of it.

At least stamp duty and inheritance tax don’t hit very often though. Others we are not so lucky with.National Insurance is a way to stealthily tax workers’ income at 30% rather than 20%, as advertised.

Meanwhile, repeated use of the dark art of fiscal drag has rendered even income tax bad, pulling huge numbers into the 40% band, as the threshold at which that starts has failed to budge with wages or inflation – and even been dragged down.

Local taxation is no less of a mess.

Council tax is levied locally, sent to central government, and then redistributed back out to those local authorities. Business rates are a bugbear of many firms, who say they are actually putting them out of business

It’s safe to say that if you designed a tax system from scratch it wouldn’t look like this.

The big problem is that once you get yourself into this mess and start relying on taxes judged to be unfair or misleading, how do you fix it?

You might argue Mr Osborne can only tinker at the edges thanks to the nation’s parlous finances, but I don’t doubt that if we fixed this lot once and for all our economy would be much better.

Obviously, I'm not suggesting it would be a good idea to scrap all these taxes and not replace them with anything - we'd go from low tax paradise to broke pretty quickly if we did that.

However, each one of these main taxes has managed to go wrong, so they at least need putting back in a position where they make sense.